UPT Example
Calculate the minerals depletion allowance.
Assumptions:
Your company acquired a copper deposit with 3.5 Mt Reserves and 1 Mt Resources at 2.20 M€. Additional exploration works costed 0.76 M€. The production rate is currently at 0.8 Mt/a.
Calculate the UPT for year 1 and 2. There are three different scenarios for year 2:
- Case A: Everything „normal“
- Case B: Copper Price rising (Cut-off changes, reserves increase by 0.2 Mt)
- Case C: Reconciliation shows error in model (overestimation detected) → Reserves and Resources decrease by 2%
UPT=depletion basis/reserve tonnage
Depletion basis=fair market value – acc. Depletion
Year 1:
UPT=(2.2 M€+0.76M€)/(3.5Mt+0.5*1Mt)=2.96M€/4Mt=0.74€/t
Depletion allowance → 0.74€/t*0.8 Mt/a → 592k€.
Year 2:
Scenario A:
UPT=(2.2M€+0.76M€-0.592)/(3.5-0.8+0.5)=2.368/3.2=0.74€/t
Scenario B:
UPT=(2.2M€+0.76M€-0.592)/(3.5-0.8+0.2+(1-0.2)*0.5)=2.368/3.3=0.72€/t
Scenario C:
UPT=(2.2M€+0.76M€-0.592)/(3.43-0.8+0.5*0.98)=2.368/3.12=0.76€/t
